Stronger governance needs more than regulatory push

TWO weeks ago, the Securities Commission (SC) released the Corporate Governance Monitor 2025 (CGM).

In this year’s report, based on the Oct 1, 2025 cut-off date, the corporate governance practices of 1,052 companies were reviewed, an increase of 25 companies from the 1,027 reviewed last year.

Over the course of a year, the total number of directors increased by 3% year-on-year (y-o-y) to 5,849, with women directors accounting for nearly 65% of the increase.

Reduced appointments

All in, there were 893 board appointments and re-elections in 2025, compared with 1,233 last year – a drop of 27.6%.

Of these, 56% were independent non-executive directors (INEDs), followed by executive directors (EDs) at 26%, and non-independent non-executive directors (NINEDs) at 18%.

There was indeed a continuous injection of new blood, as 65% of all appointments in 2025 were fresh faces.

Overall, women’s participation at the board level has now reached 28.7%, a 0.3 percentage point increase from the 2024 level of 28.4%, while among the Top 100 companies it stood at 34.1% (2024: 33.2%).

At the same time, gender-biased boards have declined, as none of the Top 100 companies has an all-male board.

However, eight companies among the 1,044 companies surveyed still have an all-male board.

The number of companies with more than 50% women board members has risen to 76 across all companies, of which eight are in the Top 100.

In terms of board positions held by women directors, 70.3% of them are INEDs and 18.7% are EDs.

Majority are INEDs

INEDs remain the majority of the 7,355 board positions as at the cut-off date, representing 51.9% of the total and unchanged from last year’s score, although the number of INEDs increased by 2.7% to 3,815 members from 3,714 the previous year.

At the same time, there was a notable increase in INED chairpersons, with the number rising 6.2% to 479, representing 48.8% of the total of 982 chairpersons, a slight improvement from 48.3% last year, when 451 chairperson roles were held by INEDs.

Meanwhile, the number of EDs rose by 4.2% y-o-y to 2,341 members from 2,247 in 2024.

However, disappointingly, the number of chairpersons who took on dual roles as chief executive officer (CEO) increased to 35 in 2025 from 31 in 2024.

All below 12

The number of directors serving more than nine years as INEDs has now dropped to 134 directors in 116 companies in 2025, from 136 directors across 114 companies the previous year.

Interestingly, all INEDs in this category now fall within the 10-to-12-year tenure range, with none serving beyond that.

However, as far as policy is concerned, only a few companies have adopted the step-up practice of limiting INED tenure to nine years without extension – with just 18.1% of surveyed companies having such a policy in place.

Improve adoption

With the rise in INED representation at the board level – coupled with increasing pressure from stakeholders – corporate Malaysia has shown visible improvement in adopting the best practices under the Malaysian Code on Corporate Governance (MCCG).

According to the CGM 2025, 33 out of 48 best practices achieved an adoption level of 90% or higher.

However, these tend to be the easier practices to implement, while several key best practices continue to record low adoption rates.

For instance, only 41.1% of companies met the requirement for 30% women participation on boards.

Adoption was even weaker for senior management remuneration disclosures, with just 5.1% of companies complying, and for establishing dedicated risk management committees, at 54.8%.

Encouragingly, stronger progress was seen in practices that prohibit a chairperson from sitting on any audit, remuneration, or nomination committee.

This practice rose to 72.8% adoption in 2025, up from 63.1% in the previous year.

MCCG vs LR

The CGM 2025 report also highlighted a peculiar rationale cited by some listed companies for not adopting certain best practices – namely, that they had already met the minimum requirements under the Bursa Malaysia Listing Requirements (LR), and therefore saw no need to comply with the higher standards recommended in the MCCG.

This peculiarity exists because the LR only requires companies to have at least one woman director and for one-third of the board to comprise INEDs.

In contrast, the MCCG recommends a significantly higher threshold: 30% women representation on the board, at least 50% INEDs for all listed companies, and for large-cap companies (defined as those with market capitalisation above RM2bil), a majority-INED board.

Walking the talk

While it is not an offence to deviate from the MCCG, it is rather telling when a new upcoming Main Market listing somehow appears to fall short of expectations when it comes to board composition.

A case in point is Wasco Greenergy Bhd, which launched its prospectus on 20 Nov 2025.

According to its prospectus, the company has four directors – two NINEDs (one of whom is the chairperson) and two INEDs, with one designated as the senior INED.

Of the four directors, two are women, giving the company 50% female board representation.

While it meets both the Bursa LR and MCCG thresholds for women directors and INED composition, its board committee structure raises questions.

Each of the three board committees comprises three members, but each committee includes one NINED.

The company also does not have a dedicated risk committee, placing that responsibility under the audit committee – a common practice, though not aligned with the SC’s call for standalone risk committees.

While meeting the minimum LR and MCCG thresholds is acceptable, newly listed companies are generally expected to uphold higher governance standards, with the regulators often applying stricter scrutiny before approval.

In this case, the company should have at least another INED to ensure that all board committee members are fully composed of independent directors, rather than just having an INED majority.

After all, the last three Main Market public issues have consistently observed this unwritten rule, and there is no justification to compromise on the practice.

In conclusion, CGM 2025 shows that corporate Malaysia is on the right path of meeting regulatory expectations on governance issues, but at the same time, there is a dire need to push for reforms in areas where compliance is lacking.

Bursa Malaysia’s LR should be closely aligned with the SC’s MCCG best practices, and for companies embarking on their public market journey, having fully independent board committees should be a requirement – not merely a box-ticking exercise of meeting the minimum standard.